Housing starts, new home sales, both drop

Washington -- After losing momentum over the past several months, the U.S. housing market showed some signs of bottoming out during August, with sales of existing homes holding relatively steady and new home sales posting an unexpected gain, even as builders slammed on the brakes and housing starts continued to slide.

The bright spot in the August picture, sort of, was the 4.1% climb in new home sales, the first increase in five months. But the news wasn't as good as it seemed, nor the increase what it appeared, since the August gain was inflated when July sales were revised down substantially, by 35,000 units. Had July numbers not been taken down, August would have shown a further drop of 2.1%.

That further intensified the jitters of already skittish home builders, who continued to take a wait-and-see attitude in August, driving housing starts down a steep 6.0%. Reluctant to pony up the cash to start building houses that people may or may not buy, starts have now plummeted by 26.5% to 1.7 million units on a seasonally adjusted basis from a 13-month high of 2.3 million in February.